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Economic Policy Institute and The State of Working America–The Recession Isn’t Over

2015-08-24

For an interesting, and different, view of what is happening to the economy, try this website created by the Economic Policy Institute, called The State of Working America:

The Economic Policy Institute, a nonpartisan, nonprofit Washington, D.C. think tank, was created in 1986 to broaden the discussion about economic policy to include the interests of low- and middle-income workers. EPI was the first—and remains the premier—think tank focusing on the economic condition of low- and middle-income Americans and their families.

For example, there is the chart showing what percentage of the population of the US is actually working (as opposed to the “unemployment rate”, which only measures what percentage of the population is actively looking for work)– this chart, running from 1948 to the present, shows that the working percentage peaked in February 2000 at 64.6% (in June 1948, 57% of the working-age population was actually working) and bottomed out in September 2003 at 62%. The rate rose again to 63.3% in January 2007, dropped more dramatically to 58.3% in December 2009, then increased to 59.4% in May 2015; it is now at 59.2% as of August. Clearly, if we look only at the latest drop of about 5% since January 2007, we have not yet improved to that level, only adding 1%; if we look at the rate since Clinton left office of 64.4% in January 2001, we are still lacking 5%, out of a 6% drop. If we look at the rates since 1948, we are within 1.5% of the low of 57% then.

Therefore, if we want to have something close to a historical high of 64.6% fifteen years ago, we have a long way to go. If we just want to get back to eight years ago, we still have a long way to go. We can conclude that the recession is not over, not by a long shot. The official “unemployment rate” shows a skewed picture: at 5.3%, we are within 1% of the historic low of 4.4% in October 2006 and nearly recovered from the historic high of 9.8% in September 2009.

Put another way, if we compare the number of potential new jobs with those required to keep up with the growth in population, we see a shortfall of 2.9 million (of a total of 145 million.) At its nadir, the shortfall of jobs was about 10 million in 2009. The previous recession had a shortfall of about 3 million jobs at its nadir in 2003-4. Thus, we can say that the current recession is not over and is now at a level reflected by the worst of the previous recession.

Charts for all of these numbers and many more are available at the website; they show that the current recession, much worse than the last recession (although not as bad as the “normal” state of affairs in 1948), is not over and we have a long way to go. This state of affairs is true for even highly employed people like those with advanced degrees; the unemployment rate for these highly trained people has gone from 1.7% to 2.4%, while the corresponding rate for those with less than a high school degree has gone from 10.3% to 11.9%.

Another interesting chart shows that, unlike all previous recessions, the number of public sector employees has actually decreased since the start of the most recent recession. Apparently, the state and federal governments have reduced their number of employees despite the improvement in the state of the economy; in all previous recessions, the number of public employees has increased at a higher rate than the number of private employees. This is probably due to the fact that there has been no new budget for the federal government since Obama was elected, due to the obstruction by the Republican Congress of the normal budgetary process (the federal budget has been on “automatic”, meaning it hasn’t even kept pace with inflation). In addition, state governments have shed employees because the revenues at the state level have been dramatically reduced in almost every state. This is a contradiction of the appropriate behavior of governments during recessions, in which the government is supposed to engage in deficit spending to make up for the loss in private spending. The Republicans don’t believe in this “appropriate” Keynesian behavior, despite the fact that it has been proven successful in the Great Depression and WW II. Republicans don’t believe in facts or fact-based behavior, preferring religious and fear-based behavior. If you liked the Dark Ages, you’ll love the Republican attitude, because it is heading us in the direction of a new Dark Age.